Healthcare Reform

Healthcare Reform MDI Rotary September, 2010

Agenda • The Problem • Health Reform Bill • Outstanding Issues / Challenges • Questions

Health Reform Overall problems – broadly recognized • Highest spending per person among industrialized nations, without comparable measurable higher outcomes • Unequal access creates gaps • High employer costs weaken America in today’s global economy • Americans are increasingly angry about high costs, and how they are distributed

McKinsey International Report Potential Savings (2003) • Drugs - $66 billion • Physician remuneration - $58 billion • Nursing staffing and complexity - $50 billion • Provider profits and taxes - $75 billion • Administration costs (insurance only) - $98 billion • “Other” - $147 billion (includes inefficient incentives)

McKinsey International Report Conclusion: “ Most components of the US healthcare system are economically distorted . . . . No single factor is either the cause or the silver bullet for reform actions.”

The Overall Challenges • Expand Access & Coverage • Reduce Costs/Spending • Improve Quality

Expand Access & Coverage • Major focus of current reform • Restructure the insurance market • Expand government support for lower income individuals and families beginning in 2014 • Mandated coverage beginning in 2014

Insurance Reforms • Individuals/employers have opportunity to purchase coverage through State Exchange starting in 2012 • Require all insures to offer coverage that meets essential benefits package including preventative coverage • Subsidies for low-income individuals (2014) on a sliding scale up to 400% FPL • Limits on out of pocket expenses • State specific, includes national plan overseen by Federal Office of Personnel Management • Projected to cover 95% of legal residents

Medicaid Expansions • Expand coverage to everyone at or below 133% of the Federal Poverty Level in 2014 • Increased Federal funding Current Maine Medicaid • 100% FPL Childless Adults • 200% FPL Children • 200% FPL Parents of Children

How Reform is Paid For • Elimination of subsidy to insurance companies for Medicare Advantage • Reduced Medicare reimbursement to hospitals (CAH’s excluded) • Across the board cuts to payments • Reduced payment and penalties for complications • Reduce payment for readmissions

How Reform is Paid For • Increased taxes • Medicare tax on high incomes (2013) • “Cadillac Plan” tax (2018) • Assessments on other providers/insurers • Closing of the “Doughnut Hole” • Geographic variation • $200 million per year lowest quartile states (2011 & 2012) • IOM study

Insurance Reforms - 2010 • Community rating (standard) pricing • Continued coverage up to age 26 • Prohibit insurers from denying coverage for children based on pre-existing conditions • Ban on lifetime coverage maximums • Minimum medical loss ratio required

Insurance Reforms - Ultimately • Ban on denying coverage to adults for pre-existing conditions • No cost sharing – preventative services • Elimination of annual limits • Limits on FSA’s and HSA’s • Individual mandate to buy coverage (2014) penalties phased in • Individual penalty – $95 (2014) - $695 (2016) • Family maximum $2,085 (2016) or 2.5% household income

Employer Provisions - Current • Current tax credit for small business • Up to 50 FTE’s/avg. wages $50,000 • Employer cont. at least 50% of cost • Not available to sole prop./self-emp. • Maximum credit 35% for 10 or fewer FTE’s and avg. wages less than $25,000 • Credit to withheld taxes for nonprofits • Starting 2014 – 2 year transition 50% credit

Employer Provisions - Future • Current health plans grandfathered • Employers of 50 FTE’s or more may be required to pay an assessment for coverage • Full time = 30 hours per week • Seasonal employees with fewer than 120 days excluded • Assessment different if you offer insurance or not – and if employees are subsidized by the exchange

Employer Provisions - Future • All employers who offer insurance to provide vouchers for employees not taking insurance • Employers of 200 FTE’s or more must automatically enroll employees • Employers must provide coverage information on W-2 forms • Exclusions available for hardship ?

Other Provisions • Various Quality Intiatives • Medicaid demonstration projects • Expansion of various “rural” provisions • Improved Medicaid reimbursement for Primary Care Physicians (2013) • $50 million for liability reform demonstration projects

Outstanding Issues / Challenges • Cost drivers not directly addressed • Complexity of implementation • Physician payment “fix” • Adequacy of fines for not buying coverage • Political will to implement payment cuts and taxes

Healthcare Reform